CBOT soy outlook: Profit taking to weigh on prices

U.S. soybean futures are poised for a lower start, continuing the overnight theme as traders take profits on strong August gains.

Chicago Board of Trade soybeans are called to open down 8 cents to 10 cents. In overnight trading, CBOT November soybean futures were down 11 1/2 cents at $14.46 a bushel.

Prices weakened overnight, succumbing to a round of profit taking. General weakness in external equity and crude oil markets enticed investors to bank "windfall gains" after prices rallied to historically high levels recently, according to a market letter from AgResource Co.

Soybeans rallied over 7% in value in August, reflective of dry August weather conditions during the crops' reproductive stage.

Traders are becoming increasingly comfortable with yield estimates near 40 bushels per acre for soybeans, meaning unless we see yields below this in government forecasts, it may be hard to get values to rally from current levels, said Karl Setzer, analyst with MaxYield Cooperative in a morning market note.

The recent influx of fresh investment capital into the market has priced in lower yield and production outlooks, and without new supportive news, traders are encouraged to take some profits off the table.

Investors are also cautious of taking on added risk ahead of a long holiday weekend, yet traders remain nervous about soybean output after the U.S. Department of Agriculture slashed its estimate for yields Aug. 11 and private forecasters consistently lower yield prospects.

Industry analysts are concerned about any drop in crop potential, particularly with new crop soybean end-of-year supplies already forecast at precariously tight levels by government forecasters.

Soybean futures continue to draw support from the threat of tightening grain supplies in 2012, reflective of trader's willingness buy price breaks in recent trading sessions.

Nevertheless, traders are mindful that soybean yields still have room to improve, as late season rains will help soybean pod filling, analysts say. And slower export demand adds pressure to limit upside price movement.

Otherwise, traders will await the next round of private crop estimates leading to the next crop forecast from federal forecasters Sept. 12. INTLFCStone will release yield and production forecasts Thursday afternoon.

U.S. soybean sales totaled 593,800 metric tons in the week ended Aug. 25, the USDA reported in its weekly sales report. The sales were for delivery in the next marketing year, which begins Sept. 1. Sales increases were noted to China at 257,000 tons, and unknown destinations at 140,000 tons.